Expanding an Existing Tax Base to New Providers or Services Creates a “New Tax” Under TABOR

Case: MetroPCS California, LLC v. City of Lakewood, Colorado
Citation: 2025 CO 53 (Colo. Sept. 8, 2025)
Court: Colorado Supreme Court (en banc)
Author: Justice Gabriel

1. Introduction

MetroPCS California, LLC v. City of Lakewood, Colorado addresses a recurring Colorado constitutional question under the Taxpayer’s Bill of Rights (“TABOR”): when does a local government’s amendment of an existing tax cross the line from a permissible adjustment into a “new tax” requiring voter approval?

Lakewood enacted a business and occupation tax in 1969 on a narrow category of telephone utilities—those maintaining a “telephone exchange and lines” and supplying “local exchange telephone service.” Decades later, after telecom markets became competitive and state/federal law emphasized competition and non-barriers to entry, Lakewood amended its ordinance in 1996 and again in 2015 to reach wireless/cellular providers and services not plainly covered by the 1969 language. Lakewood did not submit either amendment to voters.

After Lakewood audited MetroPCS (a T-Mobile subsidiary operating in Lakewood) and asserted more than $1.6 million in unpaid business and occupation taxes, MetroPCS sued, alleging TABOR violations. The district court held the 1996 and 2015 ordinances were “new taxes” enacted without voter approval and therefore void. Lakewood appealed directly to the Colorado Supreme Court; MetroPCS cross-appealed on alternative theories (including “tax rate increases” and “tax policy changes”).

Core issue: Whether Lakewood’s 1996 and 2015 amendments expanded the tax in a way that imposed “new taxes” under TABOR (Colo. Const. art. X, § 20(4)(a)), and if so, whether the “incidental and de minimis” doctrine saved them.

2. Summary of the Opinion

The Colorado Supreme Court affirmed the district court. It held that both the 1996 Ordinance and the 2015 Ordinance imposed “new taxes” under TABOR because they expanded Lakewood’s business and occupation tax to cover previously untaxed telecommunications providers and services. TABOR required “voter approval in advance” for “any new tax,” and Lakewood did not obtain such approval.

The court rejected Lakewood’s argument that the ordinances merely clarified the application of a long-standing tax. It also held that the revenue increases were not merely “incidental” to the ordinances’ purposes, so it did not need to decide whether the increases were also “de minimis.” Because the “new tax” holding resolved the dispute, the court declined to reach MetroPCS’s additional arguments that the ordinances were also “tax rate increases” or “tax policy changes.”

The court affirmed that the ordinances are “void and unenforceable” and remanded for the district court to address MetroPCS’s request for appellate fees and costs under TABOR.

3. Analysis

3.1 Precedents Cited

A. Interpretation, standard of review, and constitutional restraint

  • Griswold v. Nat'l Fed'n of Indep. Bus. (2019 CO 79): Cited for de novo review of constitutional/statutory interpretation and de novo review of summary judgment. Its function here is procedural: it frames that the Supreme Court independently evaluates TABOR’s meaning and whether genuine disputes of material fact exist.
  • Rocky Mountain Gun Owners v. Polis (2020 CO 66): Reinforces the presumption of constitutionality for legislative enactments and the judiciary’s obligation to respect separation of powers—an important backdrop because TABOR challenges ask courts to invalidate voter-less fiscal enactments.
  • People v. Graves (2016 CO 15): Invoked for the principle that declaring a law unconstitutional is among the judiciary’s “gravest duties,” signaling the court’s awareness that it is voiding municipal ordinances and must do so on firm legal grounds.

B. The controlling TABOR “new tax” framework

  • TABOR Found. v. Reg'l Transp. Dist. (2018 CO 29): This is the opinion’s central doctrinal anchor. The court draws two key propositions:
    1. “New” suggests creation rather than alteration, and expanding a tax to a new class of goods or activity may constitute a “new tax.”
    2. Even if an enactment raises revenue, it is not a “new tax” if the revenue increase is both incidental to the legislation’s purpose “both as expressed and as effected” and de minimis relative to the taxing authority’s overall revenues and budget.
    In MetroPCS, the court applies—and sharpens—the “expressed vs. effected” purpose inquiry, emphasizing that legislative disclaimers of revenue motive do not control if the practical effect is predictable revenue generation.
  • HCA-Healthone, LLC v. City of Lone Tree (197 P.3d 236 (Colo. App. 2008)): Used by analogy to treat an ordinance that broadens an expressly limited tax base as a “new tax.” In HCA-Healthone, a voter-approved use tax limited to construction/building materials was later expanded to “any article of tangible personal property.” The court in MetroPCS treats Lakewood’s shift from taxing a narrow category of exchange-based utility providers to taxing broader wireless services/providers as the same kind of tax-base expansion.

C. Substance-over-form and limits on legislative labels

  • Barber v. Ritter (196 P.3d 238 (Colo. 2008)): Cited to support the proposition that a charge labeled one way (e.g., “fee”) may be a “tax” in effect; by analogy, an ordinance labeled “not a new tax” may still function as one under TABOR.
  • Town of Telluride v. Lot Thirty-Four Venture, L.L.C. (3 P.3d 30 (Colo. 2000)): Legislative pronouncements on legal questions may be instructive but are not dispositive; the judiciary ultimately determines the constitutional characterization.
  • People v. Becker (413 P.2d 185 (Colo. 1966)): “Substance and not form should govern” in tax matters. This principle underwrites the court’s skepticism of Lakewood’s stated purposes and supports an effects-based evaluation.
  • Nat'l Fed'n of Indep. Bus. v. Sebelius (567 U.S. 519 (2012)): Reinforces that the legislature cannot control constitutional characterization through labels alone. The Colorado Supreme Court uses this to bolster its approach: what matters is what the ordinance does.

3.2 Legal Reasoning

A. Step one: Was there a “new” tax base as a matter of text and scope?

The court starts with the plain language of the 1969 Ordinance: it levied a tax “against utility companies” that (1) maintain a “telephone exchange and lines connected therewith” in Lakewood and (2) supply “local exchange telephone service.”

From that baseline, the court treats the later ordinances not as clarifications, but as scope-expanding amendments:

  • 1996 Ordinance: shifted the levy to “each person” providing “basic local telecommunications service,” and deemed certain cellular/mobile radio services “basic” when provided as a business/entity’s primary local telecommunications service. This removed the “utility company” limitation and the physical-exchange infrastructure limitation.
  • 2015 Ordinance: broadened further—“The provision of cellular, mobile radio or any wireless voice service to any business, person or entity shall be deemed basic local exchange service.” The court highlights that this captures (i) service to “any person” (not just businesses/entities) and (ii) cellular service regardless of whether it is the recipient’s “primary” local service.

The decisive point is not simply that the telecom market changed. It is that the later ordinances created tax liabilities for “previously untaxed types of providers and types of services”. That kind of expansion is “creation” under TABOR’s “new tax” concept as previously articulated in TABOR Found. v. Reg'l Transp. Dist. and illustrated by HCA-Healthone, LLC v. City of Lone Tree.

B. Step two: Can the ordinances be treated as mere “clarifications” of an always-broad tax?

Lakewood argued that the tax was always, functionally, a tax on the occupation of providing telecommunications services. The court rejects this as a rewrite of the 1969 text. The City Council could have enacted a broad telecom occupation tax in 1969; it instead enacted a tax confined to exchange-based utility operations, consistent with an apparent right-of-way compensation rationale reflected in city committee minutes.

A particularly practical feature of the court’s reasoning is its comparison to Lakewood’s separate sales/use tax on “telecommunication services” already in the municipal code: that existing broader sales-tax structure shows the City knows how to tax telecommunications broadly when it chooses to, which undermines the claim that the 1969 occupation tax was always that broad.

C. Step three: The “incidental and de minimis” limitation does not save one-direction expansions

Even if an enactment raises revenue, TABOR Found. v. Reg'l Transp. Dist. recognizes an exception where the revenue increase is both (1) incidental to the legislation’s purpose (“both as expressed and as effected”) and (2) de minimis relative to overall revenues/budget.

1. Expressed purpose vs. effected purpose

The court acknowledges the ordinances’ expressed non-revenue purposes: uniformity, nondiscrimination, and removing barriers to entry. But it stresses that expressed purposes are not dispositive, because governments could otherwise evade TABOR through drafting.

On “effected purpose,” the court emphasizes foreseeability and structure:

  • Each ordinance expanded the tax to previously untaxed services, making revenue generation an obvious effect at enactment.
  • Each ordinance contained findings anticipating “numerous companies” or “multiple companies now” providing the newly defined services—showing the City expected new taxpayers to fall within the tax.
  • The City could have achieved competitive neutrality and barrier-reduction by repealing the occupation tax and relying on existing sales taxes, but instead chose to broaden the occupation tax’s reach—supporting the inference that revenue was not merely incidental.

2. Why the court did not reach “de minimis”

The court stops after concluding revenue generation was not incidental. Under its reading of TABOR Found. v. Reg'l Transp. Dist., the exception requires both incidental and de minimis. If the “incidental” prong fails, there is no need to quantify the revenue impact.

D. Unreached issues: tax rate increases, tax policy changes, and “debrucing”

The opinion expressly declines to decide whether the ordinances were also “tax rate increases” or “tax policy changes resulting in net revenue gains,” because the “new tax” holding is sufficient to affirm.

Notably, Lakewood also argued that TABOR could not be violated because voters had waived certain revenue limits when they chose to “debruce.” The court does not reach this theory either. The implicit lesson is that even where a jurisdiction has some TABOR-related voter authorization about revenue retention, that does not necessarily resolve whether a later enactment is a “new tax” requiring separate advance voter approval.

3.3 Impact

A. Municipal finance and drafting: expansions are high-risk without elections

The decision strengthens a clear rule for local governments: if an existing tax is textually limited, an amendment that brings in new categories of taxpayers, services, goods, or activities is likely a “new tax” requiring a TABOR vote—especially if the change is a one-way expansion rather than an exchange of added and removed liabilities.

B. “Competitive neutrality” compliance is not a TABOR safe harbor

State law requiring taxes to be “competitively neutral among telecommunications providers” and federal policy against barriers to telecommunications entry were part of the factual background, but they did not authorize Lakewood to bypass TABOR’s voter-approval requirement. Governments facing regulatory pressure to modernize tax structures must still navigate TABOR procedures.

C. Effects-based analysis limits “anti-TABOR-by-recital” drafting

Lakewood’s 2015 ordinance declared itself “not a new tax.” The court’s substance-over-form approach—supported by Barber v. Ritter, Town of Telluride v. Lot Thirty-Four Venture, L.L.C., People v. Becker, and Nat'l Fed'n of Indep. Bus. v. Sebelius—signals that drafters cannot avoid TABOR by adding conclusory findings. Courts will examine who becomes taxable and whether revenue generation is a predictable, non-incidental effect.

D. Litigation posture and remedies: voidness and fee exposure

The court reiterates that an ordinance enacted in violation of TABOR is “void and unenforceable,” and it remands for consideration of appellate fees and costs under TABOR. This creates meaningful risk for municipalities: beyond revenue loss, they may face attorney-fee exposure when enacting taxes without required votes.

4. Complex Concepts Simplified

  • TABOR (“Taxpayer’s Bill of Rights”): A Colorado constitutional amendment requiring, among other things, that districts obtain advance voter approval for “any new tax” (with certain exceptions not relevant here).
  • “New tax” (TABOR): TABOR does not define the term. The court treats a tax as “new” when the government creates new tax liability—commonly by expanding an existing tax to new categories of goods, services, activities, or taxpayers.
  • Business and occupation tax: A tax on the privilege of conducting certain business activities in the city (distinct from a sales tax). In this case, it targeted providers of specified local telecommunications services.
  • “Incidental and de minimis” doctrine: Under TABOR Found. v. Reg'l Transp. Dist., a change is not treated as a “new tax” if the revenue increase is (1) incidental to the law’s purpose “both as expressed and as effected” and (2) de minimis relative to the jurisdiction’s overall revenues/budget. Here, the court held the “incidental” prong failed, so it did not measure “de minimis.”
  • Substance over form: Courts look at what a law does, not what it is called. An ordinance that says “this is not a new tax” may still be a “new tax” if it newly taxes people or services that were not taxed before.
  • “Void and unenforceable”: The ordinance is treated as legally invalid, meaning the city cannot enforce it as a basis for collection.
  • “Debrucing”: A common term for voter approval allowing a government to retain and spend revenues above certain TABOR limits. This case did not decide whether debrucing affects the “new tax” inquiry.

5. Conclusion

MetroPCS California, LLC v. City of Lakewood, Colorado reinforces and operationalizes a robust TABOR rule: when a municipality expands a textually limited tax to reach new providers or services, it is likely imposing a “new tax” requiring advance voter approval. The court’s approach is intentionally effects-focused—express statements disclaiming revenue purpose do not control where the ordinance predictably brings new taxpayers into the fold and operates as a one-way expansion of liability.

Practically, the decision counsels Colorado local governments to treat tax-base expansions—particularly those driven by market evolution (like telecommunications)—as constitutional events requiring elections, not merely administrative “clarifications.” It also underscores that failure to do so can render ordinances void and expose the jurisdiction to TABOR-based fee and cost claims.